Memo to FBI: If team Trump and Putin colluded, any money trail likely involves oil

Russia sold off one-fifth of its state-owned oil giant in December, but we still don’t know who bought it all.

Russian “Matryoshka” nesting dolls depicting US President Donald Trump and Russian President Vladimir Putin are displayed for sale at a St.Petersburg, Russia shop. CREDIT: AP/Dmitri Lovetsky

As the FBI investigates possible collusion between Russia and the Trump campaign, one aspect merits closer examination: the $11 billion post-election sale of 19.5 percent of the Kremlin-controlled oil giant Rosneft.

If there was an actual quid pro quo between Trump officials and the Russian government, it may well involve that sale for two reasons. First, prior to the election, “most industry watchers had written off the chances of a foreign investor being found for Rosneft,” as Fortune explained at the time. But electing someone who had vowed to improve relations with Russia appears to have changed the economic landscape.

Second, as Reuters has detailed, Russian President Vladimir Putin managed to sell off this “oil jewel without saying who bought it.” In this post, I’ll attempt to connect as many dots as possible on the Trump-Putin-Rosneft connection.

At Monday’s House Intelligence Committee hearing, where FBI Director James Comey announced his agency’s investigation into team Trump, ranking member Adam Schiff (D-CA) connected some of the dots. First, Schiff noted, “in early July, Carter Page, someone candidate Trump identified as one of his national security advisers, travels to Moscow on a trip approved by the Trump campaign.” He was nominally there to give “a speech critical of the United States and other Western countries.”

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But, Schiff notes, “according to Christopher Steele, a former British intelligence officer who is reportedly held in high regard by U.S. Intelligence, Russian sources tell him that Page has also had a secret meeting with Igor Sechin, CEO of Russian gas giant Rosneft.” (Sechin is, as the UK Guardian puts it, Putin’s “de facto deputy.”) Schiff notes that “according to Steele’s Russian sources, Page is offered brokerage fees by Sechin on a deal involving a 19 percent share of the company.”

Schiff explains that since this is a public hearing, his remarks are “drawn from public sources alone,” not all of which have been confirmed.

What makes Schiff’s concerns so salient now is that Putin did sell off 19.5 percent of Rosneft in early December and that, as Reuters reported, “it still isn’t possible to determine from public records the full identities of those who bought it.”

No FBI investigation into collusion can possibly be considered complete if it can’t determine the full slate of buyers — and whether any of them are connected to Trump officials or the Trump business empire.

Follow the money

Any examination of the Rosneft sale should start by looking at the 2014 deal between Exxon and Rosneft, valued at $500 billion, and eventually killed by sanctions imposed by the Obama administration.

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That deal would have married ExxonMobil, with its expertise in Arctic drilling, to Rosneft, Russia’s state-owned (i.e. Putin-controlled) oil giant, with its vast reserves in inhospitable locations. Coincidentally, it was then-Exxon CEO Rex Tillerson (now Trump’s Secretary of State) who negotiated the deal with Putin and Sechin. Tillerson’s rise as Exxon’s ‘Russia czar’ happened to coincide with the rise in power of both Putin and Sechin — and their successful kleptocratic efforts to expand Rosneft.

Not only was the deal crucial to the future of Exxon, as the Wall Street Journal reported in 2014, since the company is short on reserves — it was “expected to change the historical trajectory of Russia,” which desperately needs a long-term source of hard currency, as Rachel Maddow explained.

So the sanctions President Obama imposed after Russia seized Crimea in 2014 were a dagger to the heart of Russia’s economy and Putin’s wallet. Suddenly, the Kremlin had a half-trillion-dollar motive to elect someone who would end the sanctions.

Since the election, we’ve learned that key members of Trump’s campaign team — including Trump himself — met with Russian ambassador Sergey Kislyak, while denying publicly that they had. In particular, Trump’s national security adviser Michael Flynn was forced to resign after it turned out he talked with Kislyak about softening the sanctions. CNN notes that “current and former U.S. intelligence officials have described Kislyak as a top spy and recruiter of spies.”

Another key development since the election: Putin pulled off the Rosneft sale in December. When Fortune reported on this deal, they pointed out that it was “confounding expectations that the Kremlin’s standoff with the West would scare off major investors.”

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But this deal “pointed to a possible reassessment by foreign investors of the risks of dealing with Russia, at a time when the election of Donald Trump as U.S. president has heightened expectations of a thaw between Moscow and Washington.”

Significantly, the $11 billion raised by the sale went to the Kremlin, not Rosneft. No wonder “Russian officials were jubilant that Rosneft had pulled off a deal which will deliver a large chunk of the cash they need to fill gaps in the state budget caused by an economic slowdown and sanctions,” as Reuters reported.

Kleptocracy — and possibly meddling with a foreign election — looks like it pays very well for team Putin.

As for the buyers, Sergey Aleksashenko, a former deputy head of Russia’s central bank, wrote in a blog post earlier this year, “the main question in relation to this transaction, as ever, still sounds like this: Who is the real buyer of a 19.5 percent stake in Rosneft?”

Reuters notes that “important facts about the deal either have not been disclosed, cannot be determined solely from public records, or appear to contradict the straightforward official account of the stake being split 50/50” between Swiss oil trading firm Glencore and the Qataris. The funding sources for almost a quarter of the deal “have not been disclosed by any of the parties.”

This deal “uses a structure of shell companies owning shell companies, commonly referred to in Russia as a ‘matryoshka,’ after the wooden nesting dolls that open to reveal a smaller doll inside.” For instance, “public records show the ownership structure of the stake ultimately includes a Cayman Islands company whose beneficial owners cannot be traced.”

Unnesting all of the dolls and figuring out the full identities of the buyers should be a top priority for the FBI’s collusion investigation and anyone in the media who wants to follow the money of this ever-growing scandal.